The best thing USD/JPY has going for it is that markets have already priced in a lot of bearish U.S.-China protectionism and European political and economic uncertainties, but without some sort of trade detente, upward corrections aided by month-end adjustments will be a fade.
Beijing is responding to Washington's use of sanctions against Chinese firms with threats to limit rare earth exports to the U.S. nL4N2350SR.
USD/JPY bulls hope U.S. tariff increases and sanctions will force an eventual trade deal, but markets are increasingly worried China is readying reprisals and bracing for a prolonged and structural confrontation with negative global economic ramifications.
In May, USD/JPY is -2%, 10-year Treasury yields -23bp and 10-year JGBs just -5bp.
S&Ps are -6% and currently probing below pivotal 200-DMA support at 2,776.
Fed funds futures are pricing in two rate cuts within 12 months, reinforced by the 3-month-10-year Treasury yield curve's 13bp inversion.
Month-end and oversold U.S. yield, stocks and USD/JPY bounces would be fades, with 110 likely to cap USD/JPY.
If June brings more trade war threats, tumbling Treasury-JGB yield spreads will turn current 109 USD/JPY support into resistance.